Anti-fraud law hits Spain's elites

Model 720, the anti-fraud law passed by the Spanish Government in 2012, has claimed its first high profile victim. Rodrigo Rato, the former director of the IMF, as well as First Deputy PM, and Minister of the Economy, is being investigated. EurActiv Spain reports.

Since the legislation was first put in place, millions of euros held by Spanish taxpayers in foreign bank acounts, have come to light.

Under President Mariano Rajoy, in 2012, the Spanish government gave a green light to a tax amnesty, the so-called 750 Model. This allowed tax evaders to regularise their fiscal status, paying 10% of their tax debt. However, it also made it compulsory to identify the taxpayer. Rato embraced that model.

Just one year later, under Cristóbal Montoro, the Ministry of Finance and Public Administration, made it compulsory to report assets abroad during Q1 of every fiscal year. The former IMF chief also made this data available in April 2013.

examined both documents in the framework of the tax amnesty, and in the declaration of assets abroad, the Spanish Tax Agency (AEAT) spotted some irregularities in the data submitted by Rato. In fact, the AEAT suspects that Rato may have tried to legalise money of illegal origin via the 750 Model.

Rato, the tip of the iceberg

In February, the AEAT compiled a list of 705 people suspected of money laundering, who have been categorised as PEP (Politically Exposed Persons) to the Anti-Fraud Commission, which means that all of them have occupied relevant political positions, or have had links with persons of high rank.

However, the 720 Model, which could be the key to uncovering corrupt politicians, does not completely satisfy the European Commission, which has launched a preliminary investigation to determine if the requirement to declare assets abroad is compatible with EU legislation. Among other issues, the Commission has complained about Spain's penalty system being disproportionate.

Asked about this investigation, AEAT director Santiago Menéndez declined to draw premature conclusions. Minister of Economy Luis de Guindos said that it "is fully compatible" with the EU regulation. Nevertheless, the Committee on Petitions of the European Parliament has already dealt with claims that Spain's anti-fraud regulations "limited" the free circulation of people and capital.

The opposition Socialist Party (PSOE) wants Spain's Ministry of Finance and Public Administration to make public its list of tax evaders, and to reveal the identity of the more than 700 taxpayers that have embraced the amnesty and are currently under investigation, something the AEAT has thus far refused to do.